Independent Auditors Report in Accordance with OMB Circular A-133 Year ended June 30, 2014
OMB Circular A-133 Report Table of Contents Independent Auditors Report on Compliance for Each Major Program; Report on Internal Control over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations 1 Schedule of Expenditures of Federal Awards 4 Notes to Schedule of Expenditures of Federal Awards 5 Schedule of Findings and Questioned Costs 6 Page
KPMG LLP Suite 3800 1300 South West Fifth Avenue Portland, OR 97201 Independent Auditors Report on Compliance for Each Major Program; Report on Internal Control over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations The Board of Trustees The Reed Institute: Report on Compliance for Each Major Federal Program We have audited the Reed Institute s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Reed Institute s major federal programs for the year ended June 30, 2014. The Reed Institute s major federal programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of the Reed Institute s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Reed Institute s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Reed Institute s compliance. Opinion on Each Major Federal Program In our opinion, the Reed Institute complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2014. KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ( KPMG International ), a Swiss entity.
Other Matters We did not audit the Reed Institute s compliance with the requirements governing maintaining contact with and billing borrowers in accordance with the requirements of the Student Financial Assistance Cluster: Federal Perkins Loan program as described in the Compliance Supplement. Those requirements govern functions performed by Affiliated Computer Services, Inc. (ACS). Since we did not apply auditing procedures to satisfy ourselves as to compliance with those requirements, the scope of work was not sufficient to enable us to express, and we do not express, an opinion on compliance with those requirements. ACS s compliance with the requirements governing the functions that it performs for the Reed Institute for the year ended June 30, 2014 was examined by other accountants in accordance with the U.S. Department of Education s Audit Guide, Audits of Federal Student Financial Assistance Programs at Participating Institutions and Institution Servicers. Our report does not include the results of the other accountants examination of ACS s compliance with such requirements. Report on Internal Control over Compliance Management of the Reed Institute is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Reed Institute s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Reed Institute s internal control over compliance. Requirements governing maintaining contact with and billing borrowers under the Federal Perkins Loan Program in the Student Financial Assistance Cluster: Federal Perkins Loan Program as described in the Compliance Supplement are performed by ACS. Internal control over compliance related to such functions for the year ended June 30, 2014 was reported on by other accountants in accordance with the U.S. Department of Education s Audit Guide, Audits of Federal Student Financial Assistance Programs at Participating Institutions and Institution Servicers. Our report does not include the results of the other accountants testing of ACS s internal control over compliance related to such functions. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 2
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 We have audited the financial statements of the Reed Institute as of and for the year ended June 30, 2014, and have issued our report thereon dated October 10, 2014, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the financial statements as a whole. Portland, Oregon October 10, 2014 3
Schedule of Expenditures of Federal Awards Year ended June 30, 2014 Federal CFDA Federal number Federal grantor/pass-through grantor/program title Type of award Federal Program No. Pass-through entity expenditures Student Financial Assistance Cluster: Department of Education: 84.007 Federal Supplemental Educational Opportunity Grants Direct Award $ 209,939 84.033 Federal Work-Study Program Direct Award 156,289 84.038 Federal Perkins Loan Program Direct Award 642,197 84.063 Federal Pell Grant Program Direct Award 1,133,137 Total Student Financial Assistance Cluster 2,141,562 Research and Development Cluster: National Oceanic & Atmospheric Association 11.431 Climate and Atmospheric Research Direct Award NA130AR4310070 5,928 Total National Oceanic & Atmospheric Association 5,928 National Institute of Standards and Technology 11.609 Measurement and Engineering Research and Standards Direct Award 70NANB13H060 8,935 Total National Institute of Standards and Technology 8,935 Defense Advanced Research Projects Agency 12.91 Research and Technology Development Pass-through Award N66001-09-1-2025 UC San Diego 181,135 Total Defense Advanced Research Projects Agency 181,135 Air Force Office of Scientific Research 12.8 Application of Quantum Computing in Aerospace Pass-through Award FA9550-12-1-0046 UC San Diego Sci & Engineering 7,777 Total Air Force Office of Scientific Research 7,777 National Science Foundation: 47.041 Engineering Grants Direct Award CMMI-1156543 16,499 47.074 Biological Sciences Direct Award MCB-1150213 62,714 47.074 Biological Sciences Direct Award DEB-1021582 61,039 47.074 Biological Sciences Direct Award IOS-0818957 38,740 47.074 Biological Sciences Direct Award IOS-1257469 42,079 47.074 Biological Sciences Pass-through Award DEB-1257522 Cornell University 124,742 47.076 Education and Human Resources Pass-through Award DUE-1022574 American Institute of Mathematics 4,380 47.075 Social, Behavioral, and Economic Sciences Direct Award SBE-0915725 12,547 47.076 Education and Human Resources Direct Award DUE-1154004 42,572 Total National Science Foundation 405,312 Environmental Protection Agency 66.509 Anthropogenic Influence on Biogenic VOC Oxidation Direct Award RD-83539901-0 111,131 Total Environmental Protection Agency 111,131 National Institutes of Health: 93.273 Alcohol Research Programs Pass-through Award 2R01AA012171-11A1 UC San Diego 168,049 93.279 Drug Abuse and Addiction Research Programs Direct Award 1R01DA026127-01A1 199,072 93.855 Allergy, Immunology, and Transplantation Research Pass-through Award 1R01A1081528 University of Buffalo 1,706 93.867 Vision Research Direct Award 1R15EY023745-01 54,802 Total National Institute of Health 423,629 Total Research and Development Cluster 1,143,847 Total expenditures of federal awards $ 3,285,409 See accompanying notes to schedule of expenditures of federal awards. 4
OMB Circular A-133 Report Notes to Schedule of Expenditures of Federal Awards Year ended June 30, 2014 (1) Summary of Significant Accounting Policies The accompanying schedule of expenditures of federal awards includes all federal grants received by the Reed Institute that had activity during the year ended June 30, 2014. This schedule has been prepared on the accrual basis of accounting. (2) Loan Program Administration The Reed Institute administers the following loan program: Outstanding CFDA balance at number June 30, 2014 Perkins loans 84.038 $ 3,864,737 (3) Federal Direct Loans During the year ended June 30, 2014, the Reed Institute processed the following amount of new loans under the Federal Direct Loan program (which includes Stafford Loans and Parents Loans for undergraduate and graduate students): CFDA number Amount Direct loans 84.268 $ 2,063,216 Direct parents loans for undergraduate students 84.268 1,325,428 Direct parents loans for graduate students 84.268 24,411 Total $ 3,413,055 (4) Administrative Costs The amount of Perkins loans disbursements shown on the schedule of expenditures of federal awards includes the current year administrative cost allowance of $55,216. 5
OMB Circular A-133 Report Schedule of Findings and Questioned Costs Year ended June 30, 2014 (1) Summary of Auditors Results (a) The type of report issued on the financial statements: Unmodified (b) Significant deficiencies in internal control were disclosed by the audit of the financial statements: None reported Material weaknesses: No (c) (d) (e) Noncompliance that is material to the financial statements: No The type of report issued on compliance for major programs: Unmodified Significant deficiencies in internal control over major programs: None reported Material weaknesses: No (f) (g) Any audit findings that are required to be reported under Section.510(a) of OMB Circular A-133: No Major programs: Student Financial Assistance Cluster (h) Dollar threshold used to distinguish between Type A and Type B programs: $300,000 (i) Auditee qualified as a low-risk auditee under Section.530 of OMB Circular A-133: Yes (2) Findings Relating to the Financial Statements Reported in Accordance with Government Auditing Standards: None (3) Findings and Questioned Costs Relating to Federal Awards: None 6